Market data providers: The battle of the desktop

The financial services industry has come to rely on the data provided by financial market information disseminators such as Reuters, I-Net Bridge and Bloomberg. ITWeb takes a look behind the scenes and examines some of the competition considerations and technical issues and policies of these data providers.

During the past five years the number of news providers operating in SA has grown dramatically. Apart from the established players such as Reuters, South African Press Association, Agence France Presse and Associated Press, several others have made an appearance, including international giant Bloomberg and local Johnnic division I-Net Bridge.

IP has more flexibility, and our customers can slice and dice our services according to their needs.

Debbie Lawrence, marketing manager: Africa, Reuters

The financial services industry, particularly brokers, banks asset managers and others, have come to rely on the data provided by these services. This article concentrates on those services which focus on the provision of market and economic data to the financial services sector. It examines the technology policy of those data providers, the technical issues they face, and also looks at how users decide which providers` services to use. It also highlights the extent of competition posed by young Internet start-ups. Finally, the article examines whether technology or data is the key differentiator when it comes to competitive-edge.

There are three main players providing the South African financial services industry with data, namely Reuters, Bloomberg and I-Net Bridge.

Reuters, which previously required its customers to use proprietary hardware or computer operating systems, adopted an open architecture approach in the late 1980s. Its data feeds can be integrated with Windows applications and do not have to be stored on a dedicated desktop. The group is now in the process of migrating all its services to an Internet protocol (IP) platform.

Debbie Lawrence, Reuters` marketing manager for Africa, says the group, through Radianz, a joint venture with Equant, is aiming to provide a secure network to the global financial community. Reuters is also increasingly using extensible mark-up language (XML) to create and deliver information on the Internet.

Most Reuters clients currently receive data from satellites, via satellite dishes, with digital Telkom lines providing data updates not included in the satellite feed. But this is set to change. "We are migrating everything to IP," Lawrence says. "IP has more flexibility, and our customers can slice and dice our services according to their needs. It`s also a lot more cost-effective."

We realised we were reinventing the wheel, in addition to cost-efficiency considerations.

Debbie Lawrence, marketing manager: Africa, Reuters

Reuters is currently implementing what it calls the "Gazelle Project". "Reuters is no longer just designing products, but capabilities, such as messaging," Lawrence says. "We will be offering a range of capability, not just a box which we put down and say, 'There`s the product, take it or leave it`." The group sees itself as providing solutions, and not just data, she adds.

While Reuters has in the past developed all its products itself, it has come to accept the concept of outsourcing. "In the past, all our technology was proprietary, but we are open to outsourcing now," Lawrence says. "An example of this is our messaging, which is a joint venture with Microsoft. We realised we were reinventing the wheel, in addition to cost-efficiency considerations. The network will always be ours, but the value-added services we can source outside."

I-Net Bridge is a local company, formed only 11 years ago, although it is already a redoubtable force in data provision in SA. Its flagship product is the I-Net Station, developed entirely locally and with 3 500 users in 250 sites. Executive director Anina Morley says it is focused on the asset management environment rather than the trading room. Morley says the I-Net system is an IP network and can also be integrated with Windows applications.

With our private network we do have some Telkom issues. Sometimes the lines do go down. But we also do commit ourselves to 98%-plus uptime.

Anina Morley, executive director, I-Net Bridge

I-Net`s data is fed to clients on dedicated lines, with the two largest nodes in Cape Town and Johannesburg. The I-Net system is activated by means of an icon on clients` desktops. The IP network is the result of a decision the company made three years ago. "We looked three years ago at our content and how best to deliver it to corporate clients," says Morley. "The desktop can be customised by users, but not to a major extent," she adds.

Bloomberg, founded in 1981, has as its core product the Bloomberg Professional Service. The Bloomberg Professional Service is an interactive financial information network providing a range of features in a single package. Bloomberg used to provide its information via a dedicated Bloomberg terminal, but has moved towards what is called Open Bloomberg, where data is provided to clients on a dedicated line. Like Reuters, the data can be fed to whichever system the customer is using. (The Bloomberg public relations team was asked to participate in this article, but did not reply to enquiries.)

However, things are not always a smooth ride in Africa, and one of the main technical issues faced by data providers is the same as that faced by many companies dependent on communications infrastructure. Telecommunications annoyances in SA are by now legendary. "With our private network we do have some Telkom issues," says Morley. "Sometimes the lines do go down. But we also do commit ourselves to 98%-plus uptime."

Telkom-related problems are also a headache for Reuters at times. "Lines go down," Lawrence says. "Lines also get stolen. People see it as Reuters going down. When a line gets stolen and they can`t access Reuters, they say Reuters is down, and it becomes a Reuters problem. So we are trying to move away from reliance on telecoms."

Lines also get stolen. People see it as Reuters going down. When a line gets stolen and they can`t access Reuters, they say Reuters is down, and it becomes a Reuters problem.

Debbie Lawrence, marketing manager: Africa, Reuters

The hassles only get worse when servicing clients in other African countries. I-Net has clients in Windhoek, but Morley says the company is not considering moving into the rest of Africa just yet. "We have looked at the rest of Africa, but it is not a major drive at the moment," she adds. The whole of Africa accounts for less than 1% of The Bloomberg Professional Service`s total distribution. But Reuters does have several clients north of SA, and as a result faces some additional technical obstacles.

Lawrence says the major problems in Africa are limitations imposed by a lack of infrastructure, particularly where government policies limit the size of pipes into their countries.

Reuters and I-Net Bridge see each other as their main competitors in SA. The competition may not be quite as fierce in the large corporations, but appears to take place among the smaller financial services players, where cost becomes a factor. Most of the larger financial services companies polled say they use a combination of the services -- I-Net and either Bloomberg or Reuters, depending on their needs. Smaller firms are pickier. Industry sources say Bloomberg is used mostly by larger corporations, as it can be expensive for the smaller firms.

The data will naturally be the same, but the way we deliver it differs.

Debbie Lawrence, marketing manager: Africa, Reuters

Reuters and I-Net have different views on what differentiates them from each other. "The data we provide is the same as Bloomberg and the others," Lawrence says. "The data will naturally be the same, but the way we deliver it differs. This is why our market share is so large, because our technology is reliable." She says Reuters provides both technology solutions and data, and the group is moving towards adding to its technology solutions offering.

I-Net takes a different view. "The reliability of our fundamental data is our key strength," says Morley. "When we first launched we used a research tool from Ivor Jones Roy, and since then we have kept our edge. Another key strength is the quality of the people looking after the data. Being a local company is also a major factor, and our response to market requirements is very good."

The advent of the Internet has brought with it several young companies providing market data. These include Sharenet, McGregor-BFA, and even online brokers providing market data. Morley says these Internet start-ups do constitute a certain amount of competition, but generally only in the provision of news rather than in the provision of data and charting. "There is some competition on the news side from the free-to-air sites, but we bundle in the value-added component for our subscribers, which does give us an edge."

The reliability of our fundamental data is our key strength.

Anina Morley, executive director, I-Net Bridge

Lawrence says that Reuters was concerned at various stages about start-ups providing competition. "First we were worried when Telerate started, and then it was McGregor, but really they are used mostly by the smaller niche players. If we talk to a small player who wants only one set of data, we would tell them to use the Internet rather than taking a whole basket of products from us."

The larger firms tend to use several data providers. Those polled generally use I-Net for local information and either Bloomberg or Reuters for international data.

Vincent Malunga, economist at Sanlam Investment Management, says his company uses both Reuters and I-Net Bridge. "There are certain things that Bridge cannot do that Reuters can, and things that Reuters cannot do that Bridge can," he says. "We are constantly evaluating our needs, and we have also started using DataStream.

"I mostly have my I-Net screen open to track currencies, commodities, key shares and indices," he says. He uses mainly Bloomberg for international data. "They are an indispensable part of my work."

There are certain things that Bridge cannot do that Reuters can, and things that Reuters cannot do that Bridge can.

Vincent Malunga, economist, Sanlam Investment Management

Claude van Cuyck, portfolio manager at Gryphon Asset Management, says his company uses I-Net Bridge, Reuters and Bloomberg. Each provider is used for different reasons. For domestic data, "there are few competitors that can compete locally with I-Net Bridge", he says. "The charting is fantastic locally, and so is the bond system." He relies more on Bloomberg for international data, he adds.

There is some consensus among the various financial services professionals polled that Reuters and Bloomberg are useful from a news perspective rather than charting. "Reuters doesn`t have the same graphics capability as I-Net Bridge," says Van Cuyck.

Gensec is a large Reuters house, although it also uses I-Net, McGregor and Bloomberg. "We use McGregor not for the live feed but for the historical data, which is quite good," says Marion Dunkley, a business analyst in Gensec`s IT department. She agrees that the different providers are used for different purposes. "Our bond traders use Reuters, Bloomberg is used by the market makers and also the equity guys, while I-Net is big with the research analysts because its historical data is good and goes way back. But really we are a big Reuters house. We use it for dealing as well."

Our bond traders use Reuters, Bloomberg is used by the market makers and also the equity guys, while I-Net is big with the research analysts because its historical data is good and goes way back.

Marion Dunkley, business analyst, Gensec

Dunkley says technology is playing an increasingly important role in the choice of data provider. "The Reuters screens have been the same for many years, but the market pushed them into moving towards an object-oriented system, Kobra. The Reuters technology is also very stable and it is very easy to use," she adds.

Judging from financial professionals polled, many of whom did not want to be quoted by name, the choice of financial information provider is influenced by several factors. The consensus is that the large financial companies use all the data providers they can afford, as each one offers a different focus for bond traders, market makers and so on. However, smaller players are forced to make a choice. Some say the choice is based primarily on what data is provided and whether that data fits in with the company`s focus, while others feel that cost and ease of use also come into play. Technology factors such as system integration were cited as a major consideration by only a small minority of those interviewed, although functionality ranked high as a consideration in choosing a provider. The real competition, it appears, is for the business of the smaller to medium-sized financial services companies.

A few times the idea was expressed that globally, there is room for only two major data providers. Whether technology or value-add is the deciding factor in who they will be will be interesting to see.